Cocokara Fine shares briefly jumped 9% on Wednesday after the company said it had decided to negotiate a potential merger with the bigger MatsumotoKiyoshi. It had considered a tie-up with another drugstore chain, Sugi Holdings, but chose an offer from MatsumotoKiyoshi instead, it said in a statement.

The companies said they could not comment on details of negotiations, such as possible terms and deadlines for the talks.

Known as “Matsukiyo”, MatsumotoKiyoshi started as a mom-and-pop pharmacy in the 1930s and has grown rapidly through aggressive store openings and acquisitions. It was a pioneer in drugstores’ sales of discount cosmetics, allowing consumers to more casually sample products.

It and other major drugstores have also expanded into snacks, soft drinks, and liquor, dealing a blow to the country’s convenience stores and supermarkets. But drugstores, like the rest of Japan’s retail industry, are now grappling with a dwindling workforce and tough price competition.

“It will not be easy to overcome business challenges on our own, and therefore it is appropriate for us to merge,” Cocokara said in a statement.

“By combining with MatsumotoKiyoshi Holdings ... there is a chance of creating major synergies such as improving work efficiency and developing private brand products.”